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Friday, 30 August 2013

Key benchmark indices surged after the rupee recovered in choppy trade after Prime Minister Dr. Manmohan Singh said in parliament that the government isn't looking at imposing restrictions on the movement of capital out of the country as he sought to allay investor concerns that have lately hurt financial markets, especially the rupee which has declined sharply against the dollar this month. Intraday volatility on the bourses was quite high as the indices alternately swung between positive and negative zone. BSE Sensex closed at 18619.7, up by 1.19%, whereas Nifty closed at 5471.8 up by 1.16% (63 point). The session was highly volatile and at one point of time Nifty was trading in the red, after a firm opening.

The overall market breadth was positive, the advance-decline figure in Nifty50 stocks stood at 28 advances to 22 declines.Outperforming sectors in today’s market were Pharma, Bank, IT and FMCG, whereas Metal, Realty & Auto were the laggards.

Further, the market breadth closed neutral as one stock was seen advancing against each declining stock.

Precious metals on CMX are trading lower with the most actively traded Gold contract on CMX eased 20 points or 1.37% at 1393.0, breaking the key support of 1400.0 level. Silver is also trading down around 2% at 23.65 with support remains intact at 23.45 an ounce. We expect prices to continue its downside for the day. On base metals prices are trading in red with LME Copper is at 7131.0, down by 0.43% and Nickel is at 13871.0, -1.66% or 250 points. Base metals prices are likely to trade with a negative bias in Coming hours. Crude Oil and Natural Gas prices on NYMEX are trading at 108.0 and 3.63 with Crude Oil lower by 80 cents while Natural Gas prices are up by a cent. Near term outlook for Crude Oil remain bearish while Natural Gas prices are likely to trade with a positive bias.

NEW DELHI: Expressing concern over successive depreciation in the value of the Indian rupee, Prime Minister Manmohan Singh on Friday said this was an outcome of external developments and promised measures internally to address the situation.

In a bid to lift sentiments in the currency markets towards the Indian currency, he also assured that there would be no measures on capital controls.

"Sudden decline in exchange rate is certainly a shock which will be addressed by other measures not by resorting to capital controls or reversing reforms," Manmohan Singh said."The depreciation in the value of the rupee since end of May is a matter of concern," the Prime Minister told the Lok Sabha. "What triggered the sharp depreciation in rupee was the market's reaction to unexpected external developments," he added.

"Clearly, we need to reduce our appetite for gold, economize the use of petroleum products and take steps to increase our exports," he said. At the same time, the fall in rupee's value was also good to some extent as it makes exports competitive.

The Prime Minister also assured that growth, which has slipped, will also pick up, even as everything would be done to contain the fiscal deficit at 4.8 percent of the gross domestic product (GDP). "Growth in first quarter of 2013-14 likely to remain flat will pick up in the next quarters," he said.

Manmohan Singh said the economy was also getting hit due to high current account deficit. He said the government and the RBI were taking necessary steps to reduce this current account deficit. "Government is confident of lowering current account deficit to $70 billion this fiscal," he said.

The Prime Minister expressed confidence that the rupee would recover and said macro stabilization was underway.(source: economictimes.indiatimes.com)

Indian Equity market started the September series on a flat note with Sensex opening at 18427.21, up by 25 points while the Nifty eased 2 points or 0.03% at 5407.45. The decision by the RBI to lend dollars to oil companies to meet their demand came as a breather both for the rupee and the stock market. Sensex continued its recovery which started yesterday,while Nifty breached 5450 mark on Friday. On international front, US stocks finished modestly higher as better than expected US GDP figure and slightly improved initial jobless claims overshadowed the mountings worries over the possible military action in Syria.Asian shares traded mixed Friday, with several markets coming off early highs as uncertainty over the stability of emerging markets persisted. ON BSE space, Midcap and Smallcap are in green, adding 0.65% and 0.86% respectively. On sectoral front, Power, Auto and Oil & Gas are trading in red while all other are trading in green. Realty is the best performing sector to gain more than 2% till now.

Further the market breath remains positive with almost 2 stocks seen advancing against each declining stock.

Thursday, 29 August 2013

The Indian benchmarks ended the day on a positive note on August 29, 2013. Expectation of VWAP buying kept markets higher for 2nd day. Actual VWAP buying emerged in end helping Nifty break above 5400. Also most players have been talking of a possible halt in downtrend with this expiry similar to the trend seen since last 4 expiries where cycles have been reversing with the expiry. Locals were seen buying aggressively in markets despite INR trading weak besides the opening strength. Softening crude prices helped sentiments. Nifty futures halted at 5420 resistance level. Most buying emerged only in all stronger names like Lupin, HDFC, Kotak Bank, Reliance, IndusInd, Hero Honda, DR Reddy which were beaten down in last few days slide. Likewise IT stocks continued to surge to new highs as INR was showing signs of stabalizing at higher levels re-rating valuations. HCL Tech, TCS surged to new life time highs while Infosys underperformed. Banks & Midcaps underperfomed. Among Banks only private banks performed while PSUs closed in red. BSE Metal index surged to highs. Advance-Decline traded firm between 1.5 times to 2 times. All these led the Sensex to close at the level of 18401.04 i.e. up by 404.89 points and the Nifty to close at the level of 5409.05 i.e. up by 124.05 points. The midcap index and the small cap index closed in green with the gain of one and half a percentage point and two-third of a percentage point respectively.Further, the market breadth closed positive as five stocks were seen advancing against four declining stocks.

Precious metals are trading lower on a correction mode with Gold trading at 1407.10 and Silver at 23.90, down by 0.82% and 2% respectively. We expect prices to trade lower for the day, which generate buying opportunity in the precious metals. Support for Gold stands at 1400.0 while that for Silver is near 23.50 level. Base metals on LME are trading in red with Copper performing the worst to decline 0.20% at 7246.75 while Zinc is the top loser to ease 0.80% at 1940.75. Intraday view on base metals stands negative. Crude Oil and Natural Gas on NYM are at 109.13 and 3.58 respectively. Crude oil is trading down by a dollar or 0.89% while Natural Gas is nominally positive by 0.08% at the time of writing this.Data to watch: Jobless Claims, US Prelim GDP Q/Q, Natural Gas Storage.

Market opened on a positive note with Sensex gained around 175 point and Nifty surged 32 points to start the day at 18170.0 and 5316.50 respectively. The Indian rupee also preformed stronger to recover sharply from the dramatic low of 68.845, recorded in the last session. Rupee (spot) opened at 67.20 versus the previous close of 68.82 against the dollar. On Global space, the US market ended positive, reversing the two straight session's losses on the back of a rally in energy stocks benefiting from rising oil prices on Wednesday. European market settled in red. Asian markets were following the positive cues from the Wall Street today morning. On BSE, sign of green glitters as Midcap and small cap are trading up by 0.50% and 0.62% respectively. On sectoral front, Consumer Durable is the best performer to edge up 2.07% while Realty is worst moving sector to ease 0.60% as we write this.Further the market breath stands positive with 810 shares seen advancing against 622 declining stocks.

Wednesday, 28 August 2013

The Indian benchmarks ended the day on a slightly negative note onAugust 18th, 2013. After the massive round of panic selling at open which halted at 5100, Nifty rebounded sharply as INR showed signs of halting after hitting weekly trendline. Rally again was led by IT names, which has become a crowded trade in market. BSE IT index reached new lifetime high today. Also expectation of a rally tomorrow is running high in market as futures on many names have been trading at discount over last few days & many expect a VWAP based buying. All stronger names collapsed in morning but saw buying interest at lows. Nonetheless they under performed overall market. Rally in Nifty topped out @5300. Cairn rallied on rising crude. Advance-Decline traded between 0.2-0.5 times. INR again remained weakest traded EM currency today. Market saw largest lifetime volumes today also on back of expiry related activity.

Precious metals are trading higher on COMEX with the most actively traded Gold contract trading at 1425.50, up by 5 points or 0.37% and Silver prices are at 24.80, higher by 0.43% at the time of writing this. We expect prices to remain positive in near term. Crude Oil and Natural Gas prices are trading in higher on NYMEX since opening with Crude Oil is up around a percent to trade above 110.20, after testing an intraday high of 112.24 and Natural Gas is up by 0.34% or a cent to trade at 3.54. Base metals on LME are trading in red today, three-month Copper contract is trading at 7283.0, lower by 0.35% or 25 points and support comes at 7230.0 while Nickel is the worst performer to ease 145 points or a percent to trade at 14280.0.Data to watch: Pending Home Sales and Crude Oil Inventories.

MUMBAI: The Indian rupee today is the worst performing currency in the world. The rupee is down more than 7.5 per cent this week and more than 13 per cent in August alone. It has plunged nearly 25 per cent in 2013. A host of negative factors have been responsible for its fall.

The latest one to spook the markets has been the geo-political concerns in the MiddleEast. There are allegations that Syria used chemical weapons on civilians. The US, UK and France are contemplating a military action against Syria, which has had negative impact on financial assets markets including currencies and equity.

The Asian economies have already been under stress on speculation that US Federal Reserve will sooner than later start curbing stimulus leading to money flowing out of these economies.

The whole of Asia and other emerging economies are in a tight spot. The Indonesian rupiah, Philippine peso, Malaysian ringgit, Thai baht have been falling every day and are now at multi-year lows.

The Indian rupee has outperformed all these currencies on the downside. It started falling on factors like record high trade deficit, lower growth and high inflation. The fact that the structural and fundamental issues in India are not getting resolved also hurt the currency.

The government measure came in too late and were not been appreciated by the market. It forced the government to come out with host of steps in all directions. The measures seen as a desperate act ahead of general elections next year are proving counterproductive.

The markets read the government's short- term measures as quick fix and band aid steps, which will not lead to long standing solution nor get immediate liquidity into the markets.

The curbing of outflows by the government sent the markets into a panic mode and since then any step or assurances from the finance ministry have been taken with a pinch of salt.

The passage of Food Security Bill in the Lok Sabha couldn't have come at more inappropriate time. The market is worried that it will further burden the government's finance. It's a play of weak fundamentals and even weaker sentiment.

The Indian equity markets are on a downward spiral. There are worries that panic may set in if FIIs start selling actively in equities as did in the debt market.

At the beginning of 2013, the commodity prices were soft and that was a positive for the economy. But the bad news comes in droves. The commodity prices turned around following optimistic economic data from the developed world.

The crude prices are trading at 18-month high, gold is at 3-month high, base metals are at multi-month highs as well.

The Europe seems to be coming out of lows, The US economic numbers have been good, China has also started re-stocking raw material, leading to higher prices in non-ferrous metals, iron ore and steel.

The Finance minister along with other major banks and brokerages have been calling the rupee as overshot and undervalued.

JPMorgan believes the rupee weakness is leading to more weakness and the fundamentals are not so weak. CLSA in a note said the most of the India's problems are self inflicted and they don't rule out more pain.(source: economictimes.indiatimes.com)

Indian markets opened on a weak note with benchmark indices plunging over a percent each. The Sensex opened down by 200 odd points at 17786.59 and Nifty slipped 54 points to open at 5233.50. The Indian rupee fell lower, breaking the 68 mark in the early trade today, prices recorded a low of 68.95 and is trading at 68.90 as we write this. On global markets, the US stocks finished sharply lower for the second session, with the Dow falling to a 2-month low, amid escalating worries over potential US military action in Syria. Asian equities are down today over the possibility of a US-led military strike against the Syrian government. Midcap and Small cap on BSE are trading down by 2.80% and 1.60% respectively and on sectoral front, BSE IT and Teck are trading in green , up by 2.44% and 1.02% respectively while all other sectors are in negative with Bnakex logging the biggest decline of 5.33% at the time of writing this.Further the market breath remains negative, as we can see 387 shares advancing against 1137 declining shares.

Tuesday, 27 August 2013

The Indian benchmarks ended the day on a sharply negative note on August 27, 2013. The Indian equity markets nosedived and ended on a weak note. Most of the decline was attributable to the fall in the Indian Rupee that plunged to a new lifetime low during the day. Stocks across the board ended on a weak note with those from the banking, capital goods, power and PSU space facing the maximum selling pressures. The BSE-Sensex closed down by about 590 points while the NSE-Nifty closed down by 189 points. The BSE Mid Cap and the BSE Small Cap indices closed on a weak note as well and were down by 2.1% and 1.7% respectively.

Further, the market breadth closed negative as one stock was seen advancing against two declining stocks.

Precious metals are trading marginally positive with Gold gained 18 points or 1.29% at 1410.0 and Silver is up by 30 cents or 1.23% to trade at 24.30 at the time of writing this. The near term outlook remains positive for Gold and Silver with resistance coming around 1420.0 for Gold and that for Silver comes at 24.40 an ounce. Base metals are trading in negative today with 3-month Copper contract is down by 0.75% at 7298.50 along with all other metals which are similarly down since morning. We expect range bound trading in base metals for the day. Crude Oil and Natural Gas on NYM are trading at 106.77 and 3.51, up by 0.79% and 0.09% respectively. The intraday view stands positive for both the commodities.

The Indian equity market opened sharply lower today, the Senex opened at 18330.80, down by 227 points or 1.22% and Nifty eased 73 points or 1.34% at 5403.0 at the time of opening. The Indian rupee opened weak by 70 paise at 65 per dollar versus 64.30 yesterday. Rupee is tracking cues from emerging markets and trading weak. Month-end dollar demand from oil importers will put further pressures on the rupee. On Global front, US stocks fell in light volume on Monday after US Secretary of State John Kerry called Syria's use of chemical weapons "undeniable." In Europe, shares closed slightly lower with fears of a government collapse in Italy dragging down the Italian index. Asian markets were trading lower today morning. Midcap and Smallcap on BSE are trading in red with Mid cap down by 0.75% and Small cap by 0.46%. On sectoral front, IT and Teck are the exception to trade positive by 1.27% and 0.79% respectively while all other sectors are trading in negative. Bankex is the worst performer to witness a decline of 3.36% as we write this.

Further the market breath turned negative with 494 shares seen advancing against 961 declining shares.

Monday, 26 August 2013

Gold prices on COMEX are trading marginally higher with the recent delivery Gold contract trading at 1395.80, up by 10 cents and Silver is up by 1.46% at 24.08 at the time of writing this. The near term outlook remains positive for Gold and Silver and we expect prices to trade higher in coming hours. Base metals are trading in a narrow range with Copper on MCX trading at 476.45, up by 0.33% and other metals are also similarly up today. LME is closed today in observance of Summer Bank holiday. Crude Oil and Natural Gas prices are trading in green with Oil front month contract trading at 106.60, +0.15% and Natural Gas is at 3.54, up by 1.64% On NYMEX. We expect prices to trade in a narrow range with a positive bias for the day.

Indian equity market started week on a positive note with Sensex opening higher by almost 100 odd points at 18602.56 and Nifty surged 30 points to open the day at 5499.40. The Indian rupee started the day on a weaker beat, currently rupee is trading at 64.07, after opening at 63.69 vs the previous session's close of 63.35. We saw aggressive selling by RBI on Friday afternoon, which caused a sharp fall in dollar/rupee levels to 63.20. If that kind of selling is repeated today, then rupee could retest its previous low and a break below that will lead prices further down. On global front, US stocks finished Friday higher after soft data out of the housing sector convinced investors that the Federal Reserve will likely keep stimulus programs in place for longer than expected. Europe too ended marginally positive on Friday. On BSE, Midcap and Small cap are trading positive with a gain of 0.88% and 0.81% respectively. On secotral front, We can see every sector trading in green with Capital goods logging the maximum gain to edge 2.10% higher, followed by all others.

Further the market breath stands positive with 822 shares seen advancing against 272 declining shares, 52 shares are unchanged.

Friday, 23 August 2013

Indian equity markets had a rather volatile trading session today. The markets started the days' proceeding on a negative note, but managed to turn positive by afternoon. Strong buying activity during the second half of the day led the Indian equity markets to end the day on a positive note. Barring stocks from the realty sector, stocks across the board ended on a firm note with those from the capital goods, banking and oil and gas sectors leading the pack of gainers. While the BSE-Sensex closed higher by 206 points, the NSE-Nifty closed higher by 63 points. The midcap index and the small cap index closed in green with the gain of nine –tens of a percentage point and nearly three-fourth of a percentage point respectively.

Further, the market breadth closed positive as four stocks were seen advancing against three declining stocks.

Precious metals are trading marginally positive in a narrow range with Gold up by 0.34% or 5 point and Silver is higher by 8 cents at 1376.10 and 23.16 respectively. The near term prices action is likely to remain bullish for the day with Gold prices are expected to face resistance around 1380.0 and Silver around 23.5 an ounce. Base metals on LME are trading positive with 3-month Copper is trading at 7352.50, up 60 points and Nickel is logging the maximum gain to trade at 14552.0, +145 points or a percent. The short term outlook remains positive for base metals. Crude Oil on NYM are trading up by 0.28% and Natural Gas is trading down by 0.21% at 105.24 and 3.53.

Market opened silent today the Sensex slipper just 1.50 points and Nifty was up by 0.15 points at 18311.36 and 5408.60 respectively. Equity benchmark are trading in a tight range after previous day's short covering rally, but the broader market outperformed benchmark. The rupee recovered further on Friday, opening 25 paise higher at 64.30 per dollar as against previous close of 64.55 per dollar. The currency had touched a record low of 65.56 per dollar Thursday, but later on, it had managed to recover from that level to close at 64.55. On International front, US market edged higher on Thursday amid a weaker than expected Jobless data from the DoL. Asian market are also higher on today's early trade. Midcap and Small cap on BSE are trading in green with a gain of 0.94% each and on Sectoral front, Consumer durable is the outperformer to gain almost 3% and FMCG is the worst moving sector to trade down by 0.20% as we write this.Further the market breath stands positive with 2 shares seen advancing against every one declining share.

Thursday, 22 August 2013

The Indian benchmarks ended the day on a positive note on August 22, 2013. Nifty gapped down at open on back of global weakness and a new high on INR. However talks of RBI intervention in INR above 65 helped Nifty to scale above 5400. Shorts came to cover pulling the spread higher to +12 points from a low of -15 points yesterday. However Bank Nifty failed to cross morning highs as INR was taking support at opening levels of 64.7. Top movers of Nifty were again defensive names viz. ITC, TCS, INFO, Bharti, Reliance, SunPharma. BSE Oil index also gained sharply recovering all of yesterday’s loses. After two days of outperformance, Banks again underperformed largely on back of selling in HDFC Bank & Axis Bank. BSE Healthcare index touched 200DMA from where it rallied sharply. BSE Metals surged sharply above 50DMA. Side markets underperformed as it was a Nifty covering led move. However Advance-Decline expanded from 0.4 times at open to 1.5 times, which is strongest close in two weeks.

Further, the market breadth closed positive as five stocks were seen advancing against four declining stocks.

Gold and Silver prices are trading mixed today on CMX, the most actively traded Gold contract is at 1370.0, unchanged since previous closing and Silver stands at 23.12, up by 0.68%. The near term outlook is likely to remain positive for bullions and we can see prices moving higher in near term. An important resistance for Gold comes around 1385.0 while that for Silver emerges at 23.60 an ounce. Base metals across the LME are trading positive with Copper at 7381.0, +1.5%, followed by all other metals. We maintain positive view on base metals too. Energy prices on NYM are also trading in green with Crude Oil trading at 104.25, +0.40% and Natural Gas is at 3.47, up by half a percent.Data to watch:US Jobless Claims, Natural Gas Storage

Indian equity market opened marginally lower today with Sensex at 17896.84, -10 points from the previous close and Nifty opened lower by 20 points at 5282.80. However the market is trading in green after a sluggish opening with the 50-share index trading at 5315.0 and Sensex is at 17962.0. The rupee opened at record low of 64.73 per dollar versus 64.03 on Thursday, testing an all time low of 65.12 during the early minutes. On International front, US markets closed lower on Wednesday as the FOMC minutes offered little direction on the timing of when the stimulus will be scaled back. European market too ended in the red. Asian stocks slid for a sixth day and the dollar rose outweighing an unexpected rebound in Chinese manufacturing. On BSE, Mid cap and Small cap are trading lower with a meager decline of 0.01% and 0.06% respectively. On Sectoral front, Metal is the top performer to gain 2.89% and the worst performing is Realty, down by 1.45% as we write this.

Market breath stands neutral as we can see one stock advancing against one declining stock.

Wednesday, 21 August 2013

Key benchmark indices erased sharp initial gains and ended sharply lower in choppy trade as the rupee hit record low below 64 against the dollar on rising expectations that the US Federal Reserve will soon start withdrawing its monetary stimulus to the US economy. Weakness in European stocks also dampened sentiment. The BSE Sensex settled at its lowest level in over 11 months and below the psychological 18,000 mark. The 50-unit CNX Nifty also settled at over 11-month low at 5302 down by 99 points.

The market breadth, indicating the overall health of the market, was negative. The advance to decline in Nifty50 stocks were 11 advances to 39 declines. In NSE all sectoral indices baring Bank & Finance were closed in the red, Energy & Infra were the worst hit sectors.

Precious metals on COMEX are trading lower since morning ahead of FOMC Meeting Minutes as investors speculate that Fed may scale back its economic stimulus. Actively traded Gold contract is trading down by 11.20 points or 0.82% to trade at 1361.30 and Silver eased more than a percent or 24 cents to trade at 22.83 an ounce. On LME, base metals are trading lower with Copper trading at 7278.0, down 44.50 points or 0.61%, followed by rest of metals. WTI Crude Oil is trading in red since morning at 104.62, lower by 49 cents or 0.49% per barrel while Natural Gas is up a cent or 0.35% to trade at 3.456 per mmBtu. Investors are also waiting for the Crude Oil weekly inventory data, scheduled at 8.00 PM today.

On domestic front, metals and energy prices lead by a weaker rupee against the dollar which depreciated to its all time low 64.46 before settling at 64.40.

Market opened on a positive note today with Sensex jumped almost 300 points to open at 18545.44 from the previous day's close of 18246.04 and Nifty index surged 93 points to open the session at 5494.45. Investors are cautious and waiting for further indications over the timing of the Federal Reserve’s widely expected reduction in asset purchases. The Indian rupee opened lower at 63.44 per dollar versus 63.25 yesterday after testing an all time low of 64.12. The Reserve Bank has announced another set of measures to rescue the rupee, bonds and bank stocks. The RBI said that it will purchase Rs 8,000 crore worth of bonds via open market operations on Thursday. It added that it will calibrate its purchases in the future, when needed. On Global front, US stocks eased off their highs in the final minutes of trading to close narrowly mixed with the Dow logging its fifth straight downward session. Asian markets were down in morning trade today. Emerging markets are expected to remain in focus after a brutal sell-off over the past two days. On Bse Midcap and small cap are trading positive today with adding 1.40% and 1.32% respectively and on sectoral front, Bankex is the top performer to gain more than 5% while on other hand underperformer are IT and Teck, down 0.87% and 0.68% respectively.Further the advancing shares outnumbered declining one by 1175 to 386 on BSE, whereas 86 shares are unchanged.

Tuesday, 20 August 2013

The Indian benchmarks ended the day on a flat note on August 20, 2013. Traders started bottom fishing immediately after lower open but rally in Nifty failed to cross yesterday’s close where supply resumed. India 10-yr opened @9.5% (which was also 2008 high) & continued to sell-off which helped markets scale up gradually in the day. Likewise INR also opened higher but cooled-off getting traders comfortable. Hence Banks outperformed. But nonetheless selling in stronger names continued with IT taking the lead today where profit booking began. Besides IT, selling in other stronger names like Dabur, Lupin, Sun Pharma, HDFC, Asian Paints, Hero Honda remained as players were seen taking profit off the table wherever possible. Side markets continued to outperform where some buying interest was visible after a long time; Advance-Decline opened at 0.2 times but scaled to 1.05 times closing at days high. BSE Midcap was now at last week’s lows which Nifty has already broken.

Further, the market breadth closed neutral as one stock was seen advancing against each declining stock.

Gold prices are trading flat at 1365.0 and Silver is trading down by more than a percent at 22.88 an ounce. Following the short term trend, we expect prices to recover in coming hours and we can see Gold facing resistance around 1375.0 and Silver around 23.50 level. Base metals on LME are trading in red with Lead at 2227.0, down by 0.80% and Copper is lower by 0.60% at 7272.0. Intraday price action is likely to remain bearish on base metals as prices may witness correction after a sharp rally in its last session. Crude Oil and Natural Gas prices are trading mixed on NYMEX, Crude Oil is down by 86 cents at 106.24 and Natural Gas is trading up at 3.465, +0.06% as we write this.Traders remain cautious ahead of FOMC Meeting Minutes, scheduled tomorrow at 11.30 pm.

The selling pressure after the gap-down opening has ceased for the moment on the Nifty. The 50-share index is holding the support of 5300 and the rupee too has managed to bounce back after falling below 64 per dollar mark. The sell-off in Asian markets on concerns over the US Federal Reserve's decision on bond programme was also hurting the Indian equities. The key indices Sensex opened the day at 18142.80, down 325 points and slipped below 18000 key level but gradually trimmed its early losses. On global cues, US stocks lost ground on Monday, with each of the major indexes falling for a fourth straight session, as investors were hesitant to make new bets ahead of an expected shift in Federal Reserve policy that could lead to higher interest rates. Asian market were also under pressure ahead of the Fed decision. Midcap and Small cap on BSE were seen lower with declines of 0.67% and 0.20% respectively. On Sectoral front, all the sectors are trading in red with Consumer durable leading by a decline of 3.41% as we write this.

Further the declining shares outnumbered advancing one by 870 to 640 on BSE, whereas 83 shares are unchanged.

Monday, 19 August 2013

Precious metals are trading mixed on COMEX with Gold and Silver moving in a small range since morning. The most actively traded Gold contract is at 1375.0, up 0.33% while Silver is trading down by 0.07% at 23.31 an ounce. The short term outlook turned bullish for bullion and we expect prices to extend it gains in coming session. With the exception of LME Copper all other base metals are trading in green today. Copper is trading at 7345.50, down 0.40% while other metals are up around 0.20% each, as we write this. View on base metals remains positive while on other hand, we can also see intraday declines in metals. Crude Oil on NYMEX is trading lower by 0.27% at 107.17 and Natural Gas is trading up by 2.08% at 3.43. We expect a range bound session for Crude Oil and Natural Gas while the bias remains positive for both the commodities.

People have different motives for
investment. Some want to secure their future while the others want to multiply
their money. Keeping the money in a savings bank account fails to beat the
inflation also. So, one needs to resort to different forms of investment. One
should also understand that risk is an inherent part of investment. Generally,
greater returns are associated with greater risk, e.g. stock markets, which are
associated with higher risk over shorter periods, have provided the highest
long-term returns as compared to short-term cash investments that have provided
the lowest long-term returns. Thus, it is crucial to be aware of different
forms of investment and the risk associated with each class. One cannot
eliminate the risk to achieve greater returns, but with careful research and
systematic investment, one can minimize the risk. The broader asset classes of
investment are:

Bank Deposits: These can be long term or short term. Here, the
returns are low as compared to other investments but risk is minimal as the
returns are guaranteed by the bank.

Bonds: These are issued by a government or a company. They pay a
certain interest rate periodically and re-pay the money that one pays to them
on maturity. These lock the money for a certain period of time and the risk
here is the credibility associated with the corporate or the government that
issues the bond.

Gold: This asset class is generally looked upon as an inflation
hedge and investment demand for gold generally increases in times of crisis.
Although this asset class seems very lucrative given the recent returns;
however, given the current prices, the risk-return ratio is unfavorable.

Stocks: By investing in the shares of a listed company,one gets the
ownership of the company in proportion to the amount of the investment. Here,
the returns can come in two ways: the dividends received out of the profits of
the company and the capital gains made if one sells the shares at a higher
price than his buy price. This asset class is associated with high risk in the
short term but they have historically provided higher returns than any other
asset class in the long term.

Stocks as an asset class is
highly alluring, however, many have burned their hands as they ignore the basic
principles of investing. Most people either invest in the wrong stock or at the
wrong time. Moreover, they end up "Buying High and Selling Low" when
it should actually be the reverse. Identifying the "Low" and the
"High" of the market is not possible always, however, one can
definitely make money if one has a strategic approach towards investment.

Benjamin Graham, the father of
value investing principle talks about formula investing i.e. Dollar cost
Averaging principle in his famous book “The Intelligent Investor” which is
considered as a bible for Value
Investors. He says that “dollar-cost averaging” enables one to put a fixed
amount of money into an investment at regular intervals. Every week, month, or
calendar quarter, one has to buy more—whether the markets have gone (or are
about to go) up, down, or sideways. It’s all out of sight, out of mind. That
way, one does not have to guess where the market is going.

The advantages of this type of
investment are as follows:

1. One does not need to
predict the movement of the market

2. One does not need to
identify stocks which removes the risk of investing in wrong stock

3. One does not need to time
the investment which removes the risk of entering at the wrong time

4. One gets the benefit of
diversification, by investing in an index which represents the broader market

Thus one needs to follow a simple
strategy of "regular investment" in a well-diversified portfolio.
Investment in a range of different companies from blue chip to tech stocks
removes the stock specific risk and leaves only the market risk. However, it is
not possible to invest in a whole lot of companies for a retail investor. Thus,
to avail of the opportunity of investing in top blue chip firms, one can invest
in S&P CNX Nifty which is a well diversified index of 50 stocks accounting for 21 sectors of the economy. We have devised
a strategy on Nifty to capture the cycles in the market over the medium term
based on this concept of systematic investment discussed above. Our strategy is
based on the simple premise to gain from the market volatility as we buy on
dips and sell on highs .

Let us set the rules for our strategy:

Rule 1: Wait for the market to make a high

Rule 1: Do not start investing until the market falls 13% from its
high

Rule 2: Start investing Rs. 5000 every month as soon as Nifty
falls 13% from this high

Rule 3: Double your investment every month to Rs. 10000 once the
market falls 21% from the high

Rule 4: If the market recovers its losses and rises above 21% from
the high, again reduce your investment to Rs. 5000

Rule 6: Once the previous high is achieved again, sell off all
your investments.

Let’s
see how our strategy works during the period of 2008 and 2010. Market made its
high on 8th of January 2008 at 6287.85. We decided to start our
systematic investment in Nifty Bees with an investment of Rs. 5000 as soon as
the market falls 13% from the high. Thus we start our journey with an
investment of Rs. 5000 on 21st January,2008 at Nifty of 5208.8. Once
we start investing, we decide to invest Rs. 5000 at the beginning of every
month, if on that date Nifty is below 13% from the high of 6287 observed on 8th
of January,2008 and Rs. 10000 if the market falls down 21% or more. We decide
to wind up our position, once Nifty reaches its previous high of 6287. Thus the
strategy can be summarized as under:

Nifty Range Investment

>5470 Rs.
0

5470 to 4967 Rs.
5000

< 4967 Rs.
10000

The table below details our investment and the
status of the portfolio at the beginning of each month:

DATE

NIFTY CLOSE

INVEST-MENT

SHARES BOUGHT

TOTAL SHARES
(Units)

CUM.
INVESTMENT

AVG PRICE

MKT. VALUE

P/L

21-Jan-08

5,209

5,000

0.96

0.96

5,000

5209

5,000

-

1-Feb-08

5,317

5,000

0.94

1.90

10,000

5262

10,104

104

3-Mar-08

4,953

10,000

2.02

3.92

20,000

5103

19,412

(588)

1-Apr-08

4,740

10,000

2.11

6.03

30,000

4976

28,575

(1,425)

2-May-08

5,228

5,000

0.96

6.99

35,000

5010

36,522

1,522

2-Jun-08

4,740

10,000

2.11

9.10

45,000

4948

43,108

(1,892)

1-Jul-08

3,897

10,000

2.57

11.66

55,000

4716

45,442

(9,558)

1-Aug-08

4,414

10,000

2.27

13.93

65,000

4667

61,469

(3,531)

1-Sep-08

4,349

10,000

2.30

16.23

75,000

4622

70,565

(4,435)

1-Oct-08

3,951

10,000

2.53

18.76

85,000

4531

74,109

(10,891)

3-Nov-08

3,044

10,000

3.29

22.04

95,000

4310

67,097

(27,903)

1-Dec-08

2,683

10,000

3.73

25.77

105,000

4074

69,140

(35,860)

1-Jan-09

3,033

10,000

3.30

29.07

115,000

3956

88,174

(26,826)

2-Feb-09

2,767

10,000

3.61

32.68

125,000

3825

90,419

(34,581)

2-Mar-09

2,675

10,000

3.74

36.42

135,000

3707

97,411

(37,589)

1-Apr-09

3,060

10,000

3.27

39.69

145,000

3653

121,460

(23,540)

4-May-09

3,654

10,000

2.74

42.42

155,000

3654

155,021

21

1-Jun-09

4,530

10,000

2.21

44.63

165,000

3697

202,181

37,181

1-Jul-09

4,341

10,000

2.30

46.94

175,000

3728

203,745

28,745

3-Aug-09

4,711

10,000

2.12

49.06

185,000

3771

231,135

46,135

1-Sep-09

4,625

10,000

2.16

51.22

195,000

3807

236,914

41,914

1-Oct-09

5,083

5,000

0.98

52.20

200,000

3831

265,375

65,375

3-Nov-09

4,564

10,000

2.19

54.40

210,000

3861

248,255

38,255

1-Dec-09

5,122

5,000

0.98

55.37

215,000

3883

283,613

68,613

4-Jan-10

5,232

5,000

0.96

56.33

220,000

3906

294,715

74,715

1-Feb-10

4,900

10,000

2.04

58.37

230,000

3941

285,986

55,986

2-Mar-10

5,017

5,000

1.00

59.36

235,000

3959

297,833

62,833

1-Apr-10

5,291

5,000

0.95

60.31

240,000

3979

319,069

79,069

3-May-10

5,223

5,000

0.96

61.27

245,000

3999

319,983

74,983

1-Jun-10

4,970

5,000

1.01

62.27

250,000

4015

309,510

59,510

1-Jul-10

5,251

5,000

0.95

63.23

255,000

4033

332,021

77,021

2-Aug-10

5,432

5,000

0.92

64.15

260,000

4053

348,418

88,418

1-Sep-10

5,472

-

0.00

64.15

260,000

4053

350,996

90,996

1-Oct-10

6,143

-

0.00

64.15

260,000

4053

394,074

134,074

1-Nov-10

6,118

-

0.00

64.15

260,000

4053

392,415

132,415

5-Nov-10

6,312

-

-

64.15

260,000

4053

404,918

144,918

Thus
after making a disciplined investment every month, we observed that Nifty
crossed the mark of its high observed earlier on 5th November,2010
on which date it made a new high of 6312. As decided, we wind up all our
positions. As on the liquidation date, on November 5, 2010 we had invested a
total of Rs. 2,60,000 and the market value of our portfolio stood at Rs.
404917. Thus we made a gain of Rs. 1,44,917(a gain of 56%) in a period of just
2 years. Instead if we had invested in Nifty at one go, we would have stood at
negligible gains.

A
look at the table will raise a question in your mind that the strategy is not a
perfect strategy as one also makes a loss to the tune of 34% during the course
of investment as on 1st December,2008. However our strategy has the first
premise to capture the entire cycle of the market from high to bottoms and back
to the highs and to avoid market timing. Had we timed the market, we could have
avoided the loss or might have made a bigger loss. However, we wanted our
strategy to be unbiased and simple as we had confidence that it will yield
results once the cycle is complete. Thus one has to be patient till the cycle
completes itself to see the result of a substantial gain.

However
what we discussed above was pertaining to 2008-2010 period. Again, market
started falling in 2011 and as discussed above, we were ready to implement the
same strategy. We had to take the market closing high of 6312 touched on 5th
November, 2010 as a highest point and start investing as per the strategy. We
were to start with an investment of Rs. 5000 once the market fell below 5491
(down 13% from the high of 6312) and double our investment to Rs. 10000 once it
slipped further below 4987 (down 21% from the high of 6312). Based on this, we
started a fresh journey of our investment on February 01, 2011 with Rs. 5000 at
the market close of 5417 thus procuring 0.92 units. Our journey of investment
and position creation is detailed in the table below:

DATE

NIFTY CLOSE

INVEST-MENT

SHARES BOUGHT

TOTAL SHARES
(Units)

CUM. INVESTMENT

AVG PRICE

MKT. VALUE

P/L

1-Feb-11

5,417

5,000

0.92

0.92

5,000

5,417

5,000

-

1-Mar-11

5,522

-

0

0.92

5,000

5,417

5,097

97

1-Apr-11

5,826

-

0

0.92

5,000

5,417

5,378

378

2-May-11

5,701

-

0

0.92

5,000

5,417

5,262

262

1-Jun-11

5,592

-

0

0.92

5,000

5,417

5,162

162

1-Jul-11

5,627

-

0

0.92

5,000

5,417

5,194

194

1-Aug-11

5,517

-

0

0.92

5,000

5,417

5,092

92

2-Sep-11

5,040

5,000

0.99

1.92

10,000

5,222

9,652

-348

3-Oct-11

4,850

10,000

2.06

3.98

20,000

5,029

19,288

-712

1-Nov-11

5,258

5,000

0.95

4.93

25,000

5,073

25,911

911

1-Dec-11

4,937

10,000

2.03

6.95

35,000

5036

34312

-688

2-Jan-12

4,640

10,000

2.16

9.11

45,000

4942

42249

-2751

1-Feb-12

5,198

5,000

0.96

10.07

50,000

4967

52330

2330

1-Mar-12

5,366

5,000

0.93

11.00

55,000

5001

59019

4019

2-Apr-12

5,296

5,000

0.94

11.94

60,000

5024

63253

3253

2-May-12

5,254

5,000

0.95

12.89

65,000

5041

67751

2751

1-Jun-12

4,911

10,000

2.04

14.93

75,000

5023

73322

-1678

2-Jul-12

5,284

5,000

0.95

15.88

80,000

5039

83892

3892

1-Aug-12

5,221

5,000

0.96

16.83

85,000

5049

87889

2889

3-Sep-12

5,277

5,000

0.95

17.78

90,000

5061

93828

3828

1-Oct-12

5,705

0

17.78

90,000

5061

101444

11444

1-Nov-12

5,610

0

17.78

90,000

5061

99756

9756

3-Dec-12

5,878

0

17.78

90,000

5061

104529

14529

1-Jan-13

5,938

0

17.78

90,000

5061

105585

15585

1-Feb-13

6,041

0

17.78

90,000

5061

107422

17422

1-Mar-13

5,702

0

17.78

90,000

5061

101403

11403

1-Apr-13

5,697

0

17.78

90,000

5061

101312

11312

2-May-13

5,911

0

17.78

90,000

5061

105118

15118

17-May-13

6,187

0

17.78

90,000

5061

110024

20024

We
invested Rs. 5,000 every month when the market fell below 5491 and Rs. 10,000 when
it slipped further below the 4987 mark. Thus our strategy ensured that if the
market fell further, we would invest even more to sell when the market recovers
to old highs. Thus, if the market rises, we were set to gain on our investment.
This way our investment went up to Rs 90000 and we had an accumulation of 17.78
units costing Rs 5061 per unit. All these units were sold on 17th
May, 2013 when Nifty closed 6187 mark since this was almost close to the
previous high. This yielded a return of Rs 20024/- on a staggered investment of
Rs 90000/- . This turned a yield of 9.53% per annum in the second round.
However, please note that our investment of Rs 90000/- was not at one go and
was staggered. Hence actual return is much more than 9.53%. If we club the
returns for both the cycles we have been able to earn a substantial return in
times when major portfolios have yielded very small or negative returns.

Now
considering the last highest close of 6187, touched on 17th May,
2013, we decided to start our systematic investment in Nifty with an investment
of Rs. 5000 as soon as the market falls 13% or more from this high. This stands
at 5383 mark. We will double our investment once it starts trading below 21%
from this high or more. This figure stands at 4888. . We decide to wind up our position, once
Nifty reaches near its previous high of 6187. Thus the strategy can be
summarized as under:

Nifty Range Investment

>5383 Rs.
0

5382 to 4889 Rs.
5000

< 4888 Rs.
10000

Currently, in
last two months we have not closed below 5383 mark as enumerated below. Hence
we are yet to make any fresh investments. This is depicted in the table below.

DATE

NIFTY CLOSE

INVEST-MENT

SHARES BOUGHT

TOTAL SHARES
(Units)

CUM. INVESTMENT

AVG PRICE

MKT. VALUE

P/L

3-Jun-13

5,997

0

0

0

0

0

0

0

1-Jul-13

5,834

0

0

0

0

0

0

0

1-Aug-13

5,777

0

0

0

0

0

0

0

As
we saw earlier, the market makes a high, then bottoms out, and then rises again
to the highs reached earlier, or even breaches those highs in a bullish market.
Given these market cycles, it becomes very difficult to time the market and
most of the people end up losing money. Systematic investment becomes a
prerequisite to survive these fluctuations. It brings discipline to a person’s
portfolio and eliminates the element of emotions. A person does not get worried
whether the market gains or loses as he will always stand to gain from the concept
of averaging his portfolio as diversified as Nifty.